Late yesterday, various press reports signaled what could be the beginning of the end for 2011 Department of Labor guidance that had greatly expanded legal claims against restaurants.

The 2011 rule barred businesses (mainly restaurants) from including nontipped workers in their tip pools.  That practice – if done involuntarily – then entitles the servers or waitstaff who have contributed those tips to the tip pool to minimum wage for their hours (not the tip-credit minimum wage.)

As of this morning, the DOL had not released its’ rule publicly, but according to a Law 360 report the description “suggests it would roll back the DOL’s 2011 rule amending its interpretation of the Fair Labor Standards Act to blog businesses from giving a portion of service employees’ tips to traditionally nontipped workers, such as kitchen staff.”

The attack on this 2011 guidance is also making its way through the courts.  The U.S. Supreme Court is expected to decide soon whether to review a case out of the Ninth Circuit that upheld the tip pooling rule.

The timing of the DOL’s expected rollback is unclear, but it could have a significant impact on many cases pending in the court systems or being threatened now.  At the current rate, a change could be expected in the first quarter of 2018.

For restaurants and other employers such as hotels that have tipped employees, this change ought to be closely followed.  Until we see the scope of the proposed rule change, it is unclear what the full impact on existing cases will be but given past practices on situations like this, but it might just evaporate a whole host of lawsuits that have popped up.

Stay tuned.

file0001835967537The Connecticut Supreme Court, in a unanimous decision that will be officially released April 4, 2017, has ruled that employers may not use the “tip credit” for pizza delivery drivers and therefore, the employees must be paid the standard minimum wage.

You can download the decision in Amaral Brothers, Inc. v. Department of Labor here.  The decision is no doubt a disappointment to employers who believe that the Connecticut Department of Labor’s regulations in this area far outstretch the plain language of the applicable wage/hour statute.

The case arises from a request by two Domino’s franchises for a “declaratory ruling” from the Connecticut Department of Labor (DOL) that delivery drivers are “persons, other than bartenders, who are employed in the hotel and restaurant industry, …who customarily and regularly receive gratuities.” The request arises from Conn. Gen. Stat. §31-60(b), which has been amended over the years.

Why would the employer make such a request? In doing so, the employer wanted to take advantage of the “tip credit”, in which employees are paid below the conventional minimum wage, but his or her salary is supplemented by tips from customers.

Originally, as noted by the employer’s brief to the Court: “The DOL denied Plaintiff’s Petition for the following stated reasons: (1) the regulations were valid because they served a remedial purpose, were time-tested and subject to judicial scrutiny…; and (2) the only act of “service” was handing the food to the customer at the customer’s door and so delivery drivers’ duties were not solely serving food as required under Regulations of Connecticut State Agencies § 31-62-E2(c). The DOL’s decision was that only employers of “service employees” as defined by the DOL could utilize the credit, and Plaintiff’s employees were not service employees.

A lower court upheld the DOL’s conclusions “agreeing that the regulations were ‘reasonable’, ‘time tested’, and had ‘received judicial scrutiny and legislative acquiescence’. The court also determined that the ‘minimum wage law should receive a liberal construction.'”  (You can also view the DOL’s brief to the Court here.)

The Connecticut Supreme Court upheld the Department of Labor’s interpretations here finding that the regulations issued by the agency were “not incompatible” with the enabling statute.  In doing so, the Court noted that this is a bit unusual because the employer was contending that the regulations were originally valid when issued, but repealed by implication when there was an amendment to the statute at issue.

The Court’s decision traced the origin of the tip credit in a portion of the decision that only lawyers will love. But then they get to the heart of the matter: “It was reasonable for the department to conclude that the legislature did not intend that employees such as delivery drivers, who have the potential to earn gratuities during only a small portion of their workday, would be subject to a reduction in their minimum wage with respect to time spent traveling to a customer’s home and other duties for which they do not earn gratuities.”

While the court’s decision directly implicates delivery drivers, it only impacts those employed directly by the employer (see also: UberEats, GrubHub etc.).  Nevertheless, in upholding the DOL’s interpretation here, the scope of who falls within the tip credit at restaurants is going to be further challenged in the courts.

Before employers make any further conclusions, Connecticut businesses should also be aware that the scope of the tip credit and of tip pooling is being debated at the federal level as well.  The National Restaurant Association has joined many others in asking the U.S. Supreme Court to hear a case on the subject. We should hear shortly whether the Court will accept such a case.

The Court’s decision is yet another reminder that restaurants in Connecticut should review the situations in which the tip credit is being utilized. Issues regarding tip pooling should be reviewed as well.  This case doesn’t answer all the questions that come up in the restaurant context. But in terms of figuring out the scope of the law, it helps to answer (albeit in a manner not helpful to employers overall) some outstanding questions.

Oh, Mystic Pizza!

In Connecticut, we all know that Mystic Pizza isn’t the best pizza in the state.  (I’m not even going to get into the argument about Pepe’s, Sally’s, or Modern in New Haven.)  One of my favorites is actually Harry’s Bishops Corner.

But Mystic Pizza still has a place in many of our hearts in the state due to a film in 1988 of the same name. After all, how many movies before it were filmed in Connecticut?  (Turns out there are 81 films total. Who knew?)

And better still, it starred Julia Roberts, right before she really hit it big in Pretty Woman.  And so, Julia Roberts, became one of us.

Sure, when you visited the real Mystic Pizza, it was nothing like the romanticized version in the movie. But still, it was MYSTIC PIZZA!

Alas, I was distressed to read that the famous pizza place was recently cited for wage & hour violations. Specifically, 110 employees will be paid a total of $105,000 because, the state Department of Labor found, they were paid less than minimum wage or did not receive overtime.

Unfortunately, it’s a scenario that gets played out too often and could easily be remedied.

But perhaps, I should not be too distressed. Maybe Julia Roberts can star in a sequel about an owner who takes over Mystic Pizza and hires a prominent employment law attorney to help make the place a big success again.

Did I mention I’m available?

With all that was going on with the holidays, my colleague Peter Murphy reminds us that ownership of work-related social media is not an issue to take lightly.  Why? Well, let Peter take the story from there….

Back in May, Dan posted some very helpful advice to employers about ownership of work-related social media accounts. 

In short, clarifying corporate ownership of the account, ensuring that more than one employee has access to the account, and documenting such arrangements can go a long way to avoiding disputes if and when employees leave.

Although this blog is widely read and award winning in the United States [editor’s note: Peter’s flattery will get him everywhere in the office], apparently not all employers in Europe are reading it yet.

A restaurant in Britain, The Plough, fired its head chef in December, shortly before Christmas.

Although the restaurant terminated his employment, it did not terminate the Chef’s access to the restaurant’s Twitter.

In fact, it appears that the Chef is the only person with access to the Twitter account, as the Chef’s disparaging post-termination tweets are still on the account’s homepage three weeks after his termination:

Not only was the Chef allowed to disparage the restaurant to its own customers on Twitter, but his tweets also gave the restaurant unwanted attention all over the Internet.

People reading these tweets don’t know the circumstances behind the Chef’s termination, and his termination could have been very justified.

But because the restaurant failed to control its own social media account, the Chef’s tweets are setting the narrative.

Not a recipe for success.

Employers already use employment agreements, employment policies, and separation agreements to control messy post-employment situations. As this case demonstrates, clearly defined social media practices and policies are another important tool for controlling such situations.

It’s the summer and let’s face it, our minds turn to mush.

Cooking up a lawsuit

That’s why reality television thrives in the summer.  Just the ones on food and dining alone could make up an evening: Chopped. Restaurant Impossible. The Next Food Network Star.

(Confession time: I may have watched a few too many episodes of these shows, with a particular fondness for Diners, Drive-ins and Dives.  Have you tried the Connecticut-featured ones?)

So, today’s post requires no heavy lifting. Instead, it’s a peek inside the restaurant industry (h/t to an unnamed Washington, D.C. partner for tipping me off to the story) with its dark secrets exposed.

A new lawsuit filed by a high-end dining establishment in Washington DC alleges that its executive chef abandoned his post before his three year gig was up and is now in breach of his contract.

According to the Washington City Paper, an Indian restaurant “is suing its former chef Manish Tyagi for more than $30,000 the restaurant says it spent on immigration legal fees, housing, training, and marketing for the chef, who left before his contract ran out. The lawsuit also accuses Tyagi of exploiting Rasika’s name and reputation and using “proprietary and confidential business secrets” to obtain a new position.”

Wait a second. Chefs have “proprietary and confidential business secrets”? That is what is alleged here.

In support of the Complaint, a copy of the actual contract is enclosed.  Sadly, though, there are no specifics to what trade secret the restaurant is attempting to protect. So that Tandoori Chicken Tikka recipe I suppose still remains a secret.

The contract also provides for a two year non-compete, though the article suggests that is not an issue here because the chef has set up shop in San Francisco.

(As an aside, the contract also specifies that the chef’s compensation is strictly confidential and he can’t talk about it with others. I wonder what the NLRB would think about that?)

So, lest you think the restrictive covenant craze is only for companies, think again.  Here, even a high end restaurant has put one in to try to lock in a chef from going to its competition.  And from our experience, it is increasingly common for restaurants to try to lock in talent for a period of time, though we’ve yet to see lots of litigation over chefs in Connecticut.  Might that start to change? We’ll see.

I suspect that this case — like many others out there — will settle at some point. Why? Because at the end of the day, these aren’t super-rich chefs fighting over, um, the same piece of pie. The executive chef here made $55,000.  Nothing to sneeze at, but hardly the six figure salary that some might think they would take home.

As I said, secrets exposed indeed.

 

During the holiday break, I did what many lawyers do (but will publicly deny): I watched a few “bad” reality tv shows.  

No, I didn’t watch “Here Comes Honey Boo-boo” (even I have my limits). 

But on the Food Network was a marathon of episodes of a show called “Mystery Diners”.   The show is based around so-called “Mystery Diners” who are undercover operatives that go into restaurants, bars and food service establishments with hidden cameras to perform surveillance to “find out what’s really going on when the boss isn’t around.”  

Clearly, it was time to break out the popcorn over this show. 

The episode that I flipped on didn’t disappoint, mixing employment law issues with food.  (I’ll leave it to you in the comments to decide if there is any better combination).  Here’s the way the show describes the episode:

Los Angeles restaurant owner Derrick has a problem with an employee who claims he hurt his leg on the job. This former waiter has threatened a [workers compensation] lawsuit, so to appease him, Derrick has made him a host; however, his lazy behavior has not stopped … and Derrick wonders whether the injury is even legitimate. Derrick contacts Charles for help, and Mystery Diners Shellene, Lukas and Tracey go undercover to see if this coasting host needs to be toast.  

Suffice to say that my time watching the show would probably have been better spent on nearly anything else, but I couldn’t help but think how some restaurant owners might be tempted to go through something similar. 

So, if you’re a restaurant owner in Connecticut and thinking about going on a reality show like this, let me suggest two things:

1) This is a spectacularly bad idea.

2) If you aren’t convinced that this is a bad idea, at least hire a lawyer to tell you this is a bad idea. 

There are a number of laws that may be implicated in this type of reality show “sting”.  First off, Connecticut law restricts employers from conducting surveillance, as I’ve noted before.  Connecticut law also restricts employers from conducting electronic monitoring — absent notice (which I’ve also covered here before). 

That’s not to say that you ought to do nothing when confronted with a similar situation; employees who abuse workers compensation are sometimes put under surveillance by the insurance company to determine the legitimacy of an injury.  But that is typically done by trained professionals; not television producers in search of viewers.

In addition, just because an employee has threatened a lawsuit, it does not mean that they are immune from discipline. But that discipline needs to be done carefully; otherwise, a retaliation lawsuit will be on your menu.

And keeping counsel involved, allows you, as the employer, to have privileged conversations with the attorney about legal strategy too.

So, reality television may make for good holiday watching.  But leave the hidden camera tricks for someone else.

As the dog days of summer now seem firmly entranced over Connecticut, this week’s installment of "The Basics" focuses on minimum wages.  There are lots of exceptions and rules, but the basics are fairly straightforward:

 

Photo courtesy of Library of Congress, circa 1943. 

 

A recent article by the Connecticut Law Tribune reported on the trial of two bar workers who claimed that they were terminated in retaliation for reporting a supervisor’s alleged sexual harassment of a waitress.  According to court records In the trial of  Daniel Van Kruiningen and Kimberly Chatterton v. Plan B, LLC d/b/a Mohegan After Dark, which took place in federal court in May 2007 (the article fails to mention the date), the jury found for the employer on all counts, including a common law claim for wrongful discharge. 

The Tribune article sums up the salacious allegations found in the Complaint:

Mystic resident Daniel Van Kruiningen and Kimberly Chatterton of Norwich were assistant manager and club manager of Ultra 88, an upscale lounge at the Mohegan Sun casino on Dec. 7, 2003. After hours, Chatterton was checking on other bars owned by her employer… 

Afterwards, Van Kruiningen obtained copies of the video surveillance camera’s recordings at Lucky’s Lounge, which showed that a young waitress had returned to Lucky’s after Chatterton left. Indistinctly, the videos appeared to show that [the supervisor] had sex with her on or near the bar.

According to the Complaint in the matter, they alleged that the video showed the supervisor causing the waitress to become intoxicated through serving of alcohol. Chatterton and Van Kruiningen alleged that they complained about serving alcohol to this underage waitress and about the incident, and alleged that they were fired a month after this incident in retaliation. 

From an employment law perspective, the most interesting aspect of the case is the wrongful-discharge claim.  The real action on this count took place behind the scenes before the trial, however.  In ruling on a motion for judgment, the District Court rejected the employer’s claim that reporting a supervisor’s serving of alcohol to minors was not an "important public policy" giving rise to an exception to the employment-at-will doctrine.  The court found that a wrongful discharge claim could arise from a state statute that forbids the serving of alcohol to minors

Footnote 6 of the opinion contains an interesting observation by the court about whether its ruling  will open the floodgates in other matters.

Defendant maintains that “[u]nder plaintiffs’ theory, every employee who observes – but does not participate in – a supervisor’s single violation of an important public policy, and who reports such violation to her employer, is immune from termination on an at-will basis.” …This is an overstatement because it overlooks the reality that such plaintiff must prove that he or she was terminated in retaliation for his or her reports of such  unlawful conduct; while the amount of allegedly unlawful conduct, and/or the number of times plaintiffs voiced complaints, may be relevant to the jury’s causation determination, these considerations do not render plaintiffs’ public policy claim as alleged legally insufficient.

What does this mean for employers in the state? It’s another case that has, depending on your perspective, eroded the at-will employment doctrine in Connecticut further, or expanded wrongful discharge claims to protect employees who report violations of state law. Although the employer ultimately prevailed at trial, the cost of the litigation as well as the uncertainty regarding the outcome must have weighed on the employer.

For employers in the food-services industry, the decision takes on some added significance. Because complaints regarding other employee’s violations of liquor laws could give rise to a wrongful discharge claim under this decision, employers should consider investigating such complaints and ensuring that its supervisors do not retaliate against employees who make such complaints. Advice of legal counsel to discuss the particular circumstances should also be considered.